Anyone follow 8 systems or more?

I agree with a lot of what you have stated in this thread, but the “nothing happens” bet is accounted for in the math of the pricing, so there is no additional edge there. That is just a mirage that attracts a lot of bets. The problem with “nothing happens” bets is that when something happens it erases any supposed edge you thought you had over directional plays.

Also I don’t recommend otm tail event bets and I am not sure what you are getting at with the frictional costs as they would be lower than spreads if you trade the right options.

You are muting your returns with spreads if you can truly determine direction with consistent accuracy. (I am not against spreads and use them when I believe the pricing warrants it).

We have been trading since April. Back test for -2 yrs.

Pretty consistent, BUT, makes $ in periods of higher volatility, and loses slowly in low volatility. Our system is basically a trend follower - but we track various indices that tend to lead the VIX (by a small amount) and generate a signal. We have just finished testing the C2 auto-trade system, and are starting auto-trading the model here on C2. If all works as it appears, we will move to C2 exclusively over the next month.

Currently we are in a drawdown since mid Nov. Last Sept was very good (Brexit).

One more comment on the posts above. I’m not sure how I got hit with a “non-recommendation” for Mr Money Tree, but to set the record straight, I am following him with a significant allocation, and I like his strategy. His trades are tight, he has a model behind his trading, has backtest data (alleged), and I think I understand his model (a “reversion to the mean” model - i.e. at a given price movement from a center value, the probability that the price will recover the mean is greater than the probability of continued adverse movement).

Since this is easy to back test, I expect he is trading a viable system. With all of this said - a period of drawdown is not unusual or unexpected. We have the same problem with our model.

Backtesting on historical data is easy but that by itself doesn’t say anything about future performance. The trick is in developing a system in such a way the strategy wasn’t fit to the historical data in the first place. That is what is difficult to get right. Then it needs to be validated against out of sample data (again in a way that didn’t curve fit). Was any of that done?

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Not sure, as he has alleged he has back test data, but I have not seen it

It’s not just direction, it is magnitude of the move within the specified expiration period that has to be right for long options. Basically you need to be able to predict with a great deal of precision what direction, and when the move that will occur will be significantly bigger than what the current vol premium suggests. It is the holy grail of speculation.

I have done a lot of research on this, including taking models with good directional edge, and watched them under perform (or worse negatively perform) when using ATM or OTM long options. A lot depends on the return distribution for the model as to how bad it is with long options. The story is generally the same though, the premium drag hurts compounding.

Meanwhile if you use credit spreads, it works, who cares about magnitude, if the direction was right (or even somewhat wrong!), it works. No drag, you hedge outlier risk, and you roll before gamma becomes a problem. Of course you give massive upside away, but it is worth it.

If you have a model trading the underlying that has a high win % AND produces abnormal amounts of positive outlier returns, then long options are the way to go. I think C2 members would greatly benefit if you have such a model to run here.

Seeing the king of long option academia, Nassim Taleb, not be able to do it in practice with his (long defunct) fund, is not heartening. Meanwhile you have a lot of relative unknowns (like LJM Partners) on the short side who has been making money forever. I’m not convinced that is a coincidence.

How do you handle when two systems give out contradictory signals? System A goes long when system B is short of the same instrument? :confused:

Why would it be a problem? If for example you have one system going long an S&P futures contract and another going short, C2 will have you flat, which is exactly what you want.

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Thank you for your informative posts in this thread. Can you please explain the math on this comment? I’ve created a similar approach investing in a number of systems with the idea of minimizing DD, but didn’t know how to quantify. thank you, d

I don’t disagree with most of what you say, but you tested the wrong options : )

if systems are uncorrelated, the collective DD will be the sq root of the variances (dd^2), e.g. for 15 equal $ systems of 25% DD each, the collective DD would be =(15*((1/15)^2*(25/100)^2))^0.5, or 6.5%.

If there is any strong cross-correlation between systems, then this 6.5% gets worse. As a first order check, if the 15 systems have a net correlation to the S&P of ~0, then you should be close to this value.

Roughly……

Leslie M. Gray
617-592-8379
Morgan Group LLC
lesgray@morganllc.com

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Leslie, that’s excellent. thank you for your help.

Important note re Scout Alpha that it only contains futures funds .

Hello, LeslieGray says, when we go on his Name we can see a Link which strategies he is following. I was not able to find this link. Is it maybe only the profile owner who can see this link? Can somebody confirm that he can see the strategies LeslieGray is following? Or is it just me to dump to find the correkt link? Thanks for a short feedback. Corinne

Just search for her name in the search bar , then click on her name , a window will open then scroll down …

ok found it thanks. The problem was my laptop screen was too small and the strategies showing was below the window :smile:

What systems are you following and what are the name of the ones in your basket of 30??? Thanks

Perhaps you will be interested to see:
Https://collective2.com/details/110267102

An aggressive and risky strategy with potentially high incomes.

and potentially low account balances…

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if you’re here to make money on subscriptions. you need to start over with a smaller account. You’re current track record is good enough to get people to join a new smaller system. I can guarantee you will get at least 20-30 people day 1. I will join if you start over and 20 of my friends will join.

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